Capital Corner: DCUC on Patrol With Several Hot Topics

Provided by John McKechnie

December can mean wrapping up a year’s business and looking ahead to the turning of a fresh calendar page. Not so in Washington, as a pile of unfinished business on both Capitol Hill and at the federal agencies means that 2024 is likely to start out looking a lot like 2023 when it comes to defense credit union issues.

DCUC is on patrol regarding several hot topics: NCUA Chairman Todd Harper testified in front of both the Senate Banking and House Financial Services Committees in mid-November, and he hinted at a clear need for proactive credit union management in the face of continuing economic strains.

While Harper told the Committees that credit unions are generally doing well, and are positioned to continue strong performance, at the NCUA Board meeting later in November he and NCUA staff pointed to a rise in the number of CAMEL 3 and 4 credit unions as a “reason for watchfulness.” NCUA staff, following the Board meeting, commented that “trouble is on the horizon, trouble that will have to eventually be addressed by revised NCUA examiner guidance and possible Letters to Credit Unions in early 2024.”

Other red flags, according to NCUA:

1. A sharp increase in delinquencies
   
2. MBLs (“shaky today but could become a problem if the commercial property market collapses)
   
3. Deposits coming in are at an all-time low and credit card balances are at an all-time high
   
4. Liquidity strains are obvious and are beginning to have a direct impact on mortgage lending

Look for NCUA to re-calibrate (tighten) its oversight of lending activities in early 2024.

Continuing the NCUA front, NCUA Board nominee Tonya Otsuka has been approved by the Senate Banking Committee but has not received consideration by the full Senate. She is awaiting that vote, and Hill sources say that  time may run out on the chances for approval this year, meaning that she would have to wait until January or beyond for confirmation. Rodney Hood will continue to serve until Otsuka takes the oath of office.

The House has voted to nullify the DCUC-opposed Consumer Financial Protection Bureau’s small-business data-collection rule. The next stop for the legislation is the desk of President Joe Biden, who is expected to veto it.

The bill to overturn the CFPB regulation passed the House in a 221-202 vote December 1. While the vote was driven by Republicans, six Democrats also voted in favor. An identical Senate bill adopted in October was backed by all 50 Senate Republicans and three Democrats—significant because that total still falls short of the 60 votes that would be required to override the threatened Biden veto.

Issued by CFPB in March, the rule (known as Section 1071) would require credit unions, fintechs and other lenders to collect race, gender, and demographic information before making loans to small businesses. The requirements are similar to those for mortgage lending. Credit union trade associations fought the CFPB regulation, saying that it would be overly burdensome to credit unions and would require collection of too much confidential information.

Before we leave the topic of CFPB, Bureau Director Rohit Chopra told Congress in November he intends to maintain a focus in 2024 on several familiar issues that present complications for credit unions. In Congressional testimony Chopra, said he would continue to be a “tough cop on the beat” on what he considers abusive products and services, including: overdraft protection programs, (legally undefined) junk fees and a variety of offerings that CFPB wants to eliminate.